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Target costing is a pricing method used by firms. It is defined as "a cost management tool for reducing the overall cost of a product over its entire life-cycle with the help of production, engineering, research and design". A target cost is the maximum amount of cost that can be incurred on a product and with it the firm can still earn the required profit margin from that product at a particular selling price.
In the traditional cost-plus pricing method materials, labor and overhead costs are measured and a desired profit is added to determine the selling price.Target costing involves setting a target cost by subtracting a desired profit margin from a competitive market price.
To compete effectively, organizations must continually redesign their products ( or services) in order to shorten product life cycles. The planning, development and design stage of a product is therefore critical to an organization's cost management process. Considering possible cost reduction at this stage of a product's life cycle (rather than during the production process) is now one of the most important issues facing management Accountants in industry.
Here are some examples of decisions made at the design stage which impact on the cost of a product.
- The number of different components
- Whether the components are standard or not
- The ease of changing over stools
Japanese companies have developed target costing as a response to the problem of controlling and reducing costs over the product life cycle.
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Difference between absorption costing AND target costing?
Target costing is when you have a goal for the project and its costs. Absorption costing is when you need to fix the excess spending.
What is the difference between target costing and life cycle costing?
In Target costing system, comapnies tries to achieve target prices by reducing those parts of activity which are not increasing the value of product. Life cycle costing is a concept in which companies tries to read the overall process of development of product life cycle and tries to minimise the cost at area where it is not required or not increase the value of product.
What is the characteristics and purpose of Job Costing and Process costing?
what is the purpose of process costing?
What is the and purpose of Job Costing Process Costing?
outline the characteristics and purpose of: Job costing and process costing
What does the process of job costing mean in terms of business?
Job costing or as some may know it, Job order costing is fundamental to managerial accounting. It differs from Process costing in that flow of cost is tracked by job but not a process. The main difference is that Job costing is in the nature of jobs/work and process costing in a process.
Which is the best costing system for Automobile Industry?
process costin and target costing
Define process costing its types features applications?
Job Order Costing Operation Costing Normal Costing Actual Costing Standard Costing Kaizen Costing Target Cost
Meaning and nature of target costing?
definition of target costing
Example for backflush costing and target costing?
for backflush costing and target costing?" Refer this link www.iugaza.edu.ps/users/shelles/Horngren/ch14.ppt
Difference between absorption costing AND target costing?
Target costing is when you have a goal for the project and its costs. Absorption costing is when you need to fix the excess spending.
What is the difference between target costing and life cycle costing?
In Target costing system, comapnies tries to achieve target prices by reducing those parts of activity which are not increasing the value of product. Life cycle costing is a concept in which companies tries to read the overall process of development of product life cycle and tries to minimise the cost at area where it is not required or not increase the value of product.
What is the characteristics and purpose of Job Costing and Process costing?
what is the purpose of process costing?
What is the and purpose of Job Costing Process Costing?
outline the characteristics and purpose of: Job costing and process costing
Is a hospital a job costing or process costing?
a job costing
What does the process of job costing mean in terms of business?
Job costing or as some may know it, Job order costing is fundamental to managerial accounting. It differs from Process costing in that flow of cost is tracked by job but not a process. The main difference is that Job costing is in the nature of jobs/work and process costing in a process.
What are the differences between standard and target costing?
Standard costing will be the price for something. Mostly in every store. The target costing is when one says what one is willing to pay and they can negotiate the cost.
Is Elmer's glue a job order cost or a process costing?
Process Costing
